Good news = Bad news

Dear Mr. Market:

Last week was a microcosm of how stock market headlines can really lead you to hear one thing yet see another. For a while now we’ve been barking about how the FAANG stocks have artificially propped the market as there are some serious underlying health concerns. As a reminder for our newer readers, FAANG refers to the five major U.S. technology companies – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google (GOOGL). These household names have driven the markets and camouflaged some warning signs of risk on the horizon for quite some time. If you want a peek under the hood or a refresher on just what their impact, valuation, and market caps are relative to the broad market, please click here. (pay close attention to figure 18 which shows market cap with and without FAANG as well as Figures 13 & 14 for some relative earnings/revenue performance)

So…what happened last week? Why did the markets get hit so hard? It was indeed a rough week but then again not too many weeks feel all that bad when we take a quick look in the rear view mirror. (last year there were some mornings when the stock market was down literally -9% before you had your first sip of coffee) Albeit not a pleasant memory, don’t ever forget that (we’ll touch on why later in this article).

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Commodities Now! Too many dollars chasing too few goods…

Dear Mr. Market:

You’ve heard us barking about this before but as the world navigates its way out of the Covid-19 pandemic, it won’t be just the stock market that recovers. In many respects the market has mainly bounced back due to a lot of “sugar in the blood” from massive fiscal stimulus and has still primarily been led by some mega cap names. What’s brewing below the surface and actually could turn into something far more sustainable, is a boom in commodities.

Have you ever heard the expression “Even a blind squirrel find a nut once in a while?”

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Economic Outlook: The voice and face behind Dear Mr. Market

Dear Mr. Market:

We’ve written you hundreds of letters over the past decade and on occasion it’s nice to put a face with the name! Last week, Matt Pixa of My Portfolio Guide, LLC, was given the honor and opportunity to present an Economic Outlook to the Seal Beach Chamber of Commerce.

We share it with you here and look forward to your feedback and questions!

PS- Click here to view the entire presentation but the “meat” of the show starts exactly at the 10 minute mark. Enjoy!

Why buy Gold and Why Now?

Dear Mr. Market:download

We have commented many times on how people have short memories. In the case of recent stock market behavior, however, there is no way one could forget what a ride we’ve all been on. Our job today is not to draw attention to the very obvious past but to one area of the market that is not always directly connected to stocks or bonds.

Do you have gold in your portfolio and if so, should you buy more, hold on to what you have, or dump it? Continue reading

Best Oil Stocks after the Coronavirus & Stock Market Crash

Dear Mr. Market:Oil Stocks

We won’t rehash what’s happened to the stock market due to the global pandemic of COVID-19. Like many right now, it’s been overwhelming and just hearing the word “Coronavirus” with constant updates has become all-consuming in everything we do. That said, there will of course be areas of the stock market that continue to get punished but others that provide opportunity once we get through this.

We believe the broad market will recover to the full levels we recently saw within the next three years. Some economic sectors, however, will struggle more than others as have a few additional conflicts to resolve. One such sector is oil and with the Saudi Arabia and Russian trade spat we saw U.S. oil prices drop -34% in one night! Which stocks will survive and which have the best chance to recover?

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March Madness: Final Four Investing Bracket 2019

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Dear Mr. Market:

Has your alma mater or favorite team already been bounced from the NCAA basketball tournament? My Portfolio Guide can’t change that fact but we can offer you a fresh chance with our annual spin on March Madness. For the ninth year in a row we are rolling out our unique way to share investment themes and overall thoughts on the stock market.

We’re proud to say that My Portfolio Guide was the first financial advisory firm to publish a March Madness investing tournament where we share our picks and match them up against each other! We break down and assign each of the four “regions” with an asset class and then pick teams (companies) that we think have the best chance at doing well relative to others.

Click here to see Final Four Investing Bracket Picks 2019

 

Large Cap

The most boilerplate of portfolios has won out by riding the safe bet over the past few years. This is akin to the March Madness office pool where your coworker, who knows nothing about sports and couldn’t differentiate between a basketball and a football, wins the whole pool of money by simply picking the highest seed in each bracket. What we mean by this with regards to investment asset classes is that since 2013 the Large Cap asset class has been the easy money pick. If you had a decently diversified portfolio (which by design should include exposure to International and Emerging Markets), you lost to the boilerplate and simpleton portfolio that is mainly weighted towards Large Cap. Continue reading

What to do if the Stock Market Correction turns into a Bear Market?

Dear Mr. Market:

We typically write you letters about your volatile actions and the erratic behavior you bestow upon us as investors. Many of our letters also try to put certain economic events into perspective so that people don’t let your wild stock market swings force them into making bad decisions. All that said, it’s come to our attention that we can finally roll out the answer to a question that is not always obvious:

What should an investor do if a standard stock market correction turns into a bear market? shutterstock_262478570

First off, let’s revisit the basic definition of a correction versus an official bear market. Click here for an article we wrote during the last correction in February, which incidentally at the time felt like the end of the bull market had finally come. Although the market sold off almost -10% in a short span, it clearly came back to reach record highs until October came around.

So…can we now apply the four most dangerous words in investing? Continue reading

May Gray turns into June Gloom

 

Dear Mr. Market:Unknown-3

We have discussed many times how emotionally driven you are. On some days you tempt us with your record setting high wire acts and on others we have our lips virtually wrapped around the barrel of a gun in desperation; the stock market is a wicked playground.

We don’t believe that computers or sophisticated investment algorithms can completely mitigate the perils of the stock market or protect everyone from getting out of their own way, but it can at least be used as a starting point. My Portfolio Guide relies on some very unique tools that assess the stock market each month with a fresh set of eyes. While our method of “reading the tea leaves” is not necessarily a crystal ball, it’s definitely not what most investment advisors use….which is the rear view mirror. Sadly enough, many investment advisors are just like you…they’re human and they chase recent returns and mistakenly look back in history as to what has done well. While this method of analysis is the easiest to sell clients (and themselves) it’s not as effective as taking a completely fresh look at what is happening right now and how that is statistically likely to play out in the near-term. Continue reading

March Madness: Final Four Investing Bracket 2018

Dear Mr. Market:Unknown-2

What’s more exciting to watch: Duke versus North Carolina or Apple versus Amazon? If you’re reading this you know by now that it’s not a trick question but rather our annual opportunity to have some fun spinning the NCAA college basketball tournament into a platform to share our favorite investment themes.

My Portfolio Guide was the first investment firm to publish a March Madness investing tournament where we share our picks and match them up against each other. We break down and assign each of the four “regions” with an asset class and then pick teams (companies) that we think have the best chance at doing well relative to others.

This is the eighth year we’ve done this and it’s become one of the most popular articles on the entire internet!

Click the following link to see the entire bracket for 2018:

Final Four Investing Bracket Picks 2018 

 

Large Cap

Many people now have the rearview mirror or armchair quarterback mentality right now. If you’re to be honest with yourself there are very few folks we met at this point last year that said without question that the stock market would soar to record highs. As a matter of fact, it was quite the opposite. Think back to the start of 2017 as most of us were still digesting the fact that Trump won the election. Most pundits felt that the “Trump bump” would be short lived and that the one thing the stock market doesn’t like is uncertainty …and we had plenty of it!

All that being said, we couldn’t have been more clear that if you kept your politics out of it you could have had a nice year! The easy trade was betting on America and the Large Cap asset class turned in a fine year. Guess what? We still think there is room to run here and the recent correction we experienced is exactly what the doctor ordered.

Key Match-up:

#2 US Steel (X) vs. #3 Reliance Steel (RS)

Unless you’ve been living under a rock you’ve heard that President Trump wants to reset the playing field on trade imbalances. Continue reading

Managed Futures: 5 Questions to Understand

Dear Mr. Market:

What’s your plan for when the stock market goes down? Is this plan the same for when bonds go down? Over the last several years of this bull market we have gradually prepared for this inevitable event by establishing a strategy in advance as opposed to one that is reactionary or emotional.

After reading this article we ask that you do something different the next time the sky is falling. Tell yourself that before the next market crash you won’t have fear, panic, or emotions guide your strategy but rather follow an intelligent plan.

One way to hedge your portfolio against serious drawdowns is by using alternative investments such as Managed Futures. The following five questions are from an interview by US News with Cliff Stanton, CFA and Co-Chief Investment Officer at 361 Capital:

What are the potential benefits of investing in futures?Cliff_final

The primary benefits that managed futures strategies offer are: Continue reading